08 Oct The ease of biotech beyond the Midwest and the U.S.
Having recently returned from a biotech conference in Japan, and having traveled to Canada, India and Brazil this year (two of the BRIC countries – Brazil, Russia, India, China – an acronym applied to 4 countries with huge economic growth potential and substantial economies and population), and having attended the global BIO conference which featured delegations from over 60 countries, I have remarked previously on the globality of the biotech industry.
Another conference I recently attended, and which provided some food for thought, was the Bio-MidAmerica Investor Conference which was held this year in Milwaukee. This conference, in its 5th year, has become sort of like a band of troubadours wandering the Midwest in search of the Holy Grail – venture capital (that elusive treasure). The conference originated in Chicago, next moved to St. Louis, then Minneapolis, last year Cleveland, and on to Milwaukee. The good news regarding the conference was that there were more companies presenting than in the past, almost 60; the bad news was that it seemed like the same Midwest venture capital companies with no major additions from the East and West Coast.
What did impress me, however, was that while most of the companies’ money-raising efforts were regionally focused, their product development and commercialization efforts went beyond the U.S. in a number of cases. This is good news because: (1) the life science market today is global, (2) a company’ patent portfolio extends beyond the U.S. and with a time clock ticking, the company needs to maximize the value of this technology not just in the U.S., and (3) it is often easier and faster to launch a product and technology outside of the U.S.
To support this statement and theory, I turned to an interesting website called Doing Business, which charts improvements and declines in doing business around the globe, often using good data from another interesting organization and website, the World Bank.
Doing Business’ latest report, “Doing Business in 2008,” was cited in the Wall Street Journal. As the WSJ comments, the survey evaluates the regulatory climate in 178 countries, particularly for entrepreneurs looking to start up businesses. In the report overview and comments, Eastern Europe and Russia have not only surpassed Asia in the ease of doing business but also a number of Western European countries. Some of the criteria used by the report:
• Starting a business.
• Dealing with licenses.
• Employing workers.
• Registering property.
• Getting credit.
• Protecting investors.
• Paying taxes.
• Trading across borders.
• Enforcing contracts.
• Closing a business.
While we do think about the U.S. as one large open market, the reality is that when it comes to starting a business, the U.S. can often be like 50 different countries, as the local legislation and laws for all of the above vary significantly, confusing many foreign companies trying to come into the United States and figure out where they best set up shop.
But getting back to the U.S, entrepreneurs looking to do business overseas, particularly the U.S. biotech entrepreneur, the logical criteria is looking at the size of the market for drugs, devices and diagnostics, meaning the European Union, and then Japan.
After that, selected markets such as Korea, Australia, Mexico, Russia and Brazil might be logical targets. Although China and India are attractive, most companies are frightened off still by the intellectual property issues as well the ability of local engineers and scientific talent to reverse engineer technology and come up with slight improvements that might circumvent patents. Most biotech entrepreneurs don’t think about the details of the ease (or lack thereof) of doing business in a country.
Let’s take a look at Doing Business’ latest ranking on the ease of doing business in its 2008 report results. Interestingly, the U.S. is not ranked either first or second!
2008 Survey on Ease of Doing Business
2 New Zealand
3 United States
4 Hong Kong (China)
6 United Kingdom
23 Saudi Arabia
35 South Africa
115 Costa Rica
178 The Democratic Republic of the Congo
Some very interesting statistics, particularly when you look at the BRIC countries ranked at 83 (China), 106 (Russia), 120 (India), and 122 (Brazil). Little Costa Rica has become a Mecca for medical device companies to set up manufacturing bases for the U.S. and Latin America. I would have thought personally that Japan, Israel and Korea would have had higher rankings.
If Doing Business was doing a life science version of this study there would have to be some additional factors as an overlay to the study including:
• Regulatory time to approve a drug or device.
• Intellectual property protection.
• Price approval (or reimbursement) approval time.
• Ability to sell directly to hospitals, physicians, pharmacies (distribution system).
• “Blue-Sky” clearance for local investors to invest in company.
• Local ownership versus foreign ownership.
It is clear that most small, young companies, life science or otherwise, have a lot on their plate in terms of: developing products for the market, raising money, finding appropriate employees and talent. It is hard enough to think about operating overseas when just getting established in the U.S. for U.S. homegrown companies is sufficiently taxing.
Listening to the close to 60 life science companies presenting their stories in Milwaukee to a Midwest audience, I was encouraged this year by: (1) the improved quality of the presentations, (2) thinking about the global markets for their products, and (3) the initial tie-ups with foreign companies and investors.
This shows me that the Midwest life science community is beginning to really think globally! The lessons of Friedman’s “The World is Flat” are finally becoming apparent to our often insular Midwest thinking processes. On the other hand, it is not difficult to think beyond the U.S., even in the Midwest, when a good portion of a life science company’s scientific employees and talent are coming from places like India, Pakistan, China, Russia, and other countries.
See you soon!
This article previously appeared in MidwestBusiness.com, and was reprinted with its permission.
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